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Daily US Opening News And Market Re-Cap: May 18
From RanSquawk
- Market talk of asset-reallocation from fixed-income and into equities has helped lift sentiment from the open.
- Reports that Spanish banks are pressing market regulators to reinstate a short-selling ban on domestic financials has helped keep negative sentiment at bay.
- BoE’s Posen says he is debating whether he was premature in thinking the extra GBP 125bln in QE was enough; returning to his dovish roots.
Market Re-Cap
With a lack of European data, markets have remained focused on the macroeconomic issues throughout the morning. European equities have seen mixed trade this morning, starting off sharply lower following Moody’s downgrade of 16 Spanish banks late last night. Equities have been observed on a relatively upwards trend as market talk of asset reallocation into stocks from fixed-income has somewhat buoyed sentiment, however this remains unconfirmed. The news that Spanish banks are pressing regulators to reinstate a short-selling ban on domestic banking stocks has also helped keep negative sentiment towards Spanish financials at bay, with Bankia dramatically reversing recent trends and seen higher by around 25% at the midpoint of the session.
Elsewhere, BoE’s Posen appears to have returned to his dovish roots, saying that his previous views on further QE may have been premature, prompting some initial weakness in the GDP currency, which has since pared the losses.
Earlier reports from the EU’s De Gucht saying that the ECB and the European Commission are preparing exit scenarios for Greece have since been denied by the German finance ministry, however the topic still remains the point of focus and any commentary regarding this will be keenly observed.
With no Tier 1 data expected the next risk event of the session will be Canadian CPI due at 1330BST/0730CDT and any commentary from the ongoing G8 Summit in Camp David.
Global Headlines
The chief of the Australia and New Zealand Banking Group has said volatile conditions in global markets have caused the wholesale funding market for Australian banks to freeze, a further sign that the European turmoil is taking its toll on global markets. (Sources)
Asian Headlines
A Chinese think tank has said GDP is likely to grow by around 7.5% in the second quarter of this year, with inflation at 3.3% across the same period. (Sources)
Chinese authorities may cut their benchmark lending rates as early as the current quarter, according to the chief economist of the State Information Center. (Sources)
Chinese new home prices across April were lower month-on-month in 43/70 cities surveyed and 46/70 citied were lower on the yearly reading according to the National Bureau of Statistics. (Sources) The Chinese Finance Ministry have announced further subsidies for public housing projects this year and will provide CNY 21.1bln for slum reconstruction and CNY 10.5bln for public rental housing.
The Japanese government have boosted its view on the domestic economy for the first time in nine months, raising its assessments on exports and consumer spending, but reiterating that the government is still mindful of risks from Europe. Elsewhere, the BoJ is likely to leave monetary policy on hold when its board meets next week as political pressure on the bank eases and recent data has been favourable, according to people familiar with the BoJ’s thinking. (Sources)
EU and UK Headlines
Moody's downgraded 16 Spanish banks and Santander UK, the downgrades primarily reflecting the concurrent downgrades of most of these banks' standalone credit assessments, restricted market funding, and rapid asset quality deterioration. For five of the banks, the downgrade also reflects the assessment that the Spanish government’s ability to support the banks has reduced. The rating agency said it expects Spanish bank asset quality to deteriorate further. (Sources)
Following the recent downwards trend in Spanish banking stocks, the companies are now pressing on the market regulator to reinstate a short-selling ban on domestic financials, according to banking sources. (Cinco Dias)
After a brief hawkish turn, BoE’s Posen has returned to his dovish roots by saying that it may have been premature to think the extra GBP 125bln in QE was sufficient, adding that the underlying strength of the UK economy is weaker, although official data does overstate the weakness somewhat. Following the comments, GBP saw some brief weakness and gilt futures did see a slight move to the upside, but the volatility did not last as the assets resume their trends. (Sources)
The EU’s Trade Commissioner De Gucht was quoted in Dutch press saying that the ECB and the European Commission are working on emergency exit scenarios for a Greek exit from the Eurozone, however the German finance ministry have denied the reports, but did hasten to add that it is in the government’s responsibility to consider every eventuality for the Eurozone. (Sources)
Some commentary from ECB’s Bonnici has garnered focus as he said it would be possible to use low bond rates of some European states to provide assistance to others, without giving further details. Bonnici did also say that the ECB’s recent LTRO effectiveness is somewhat reduced due to banks parking their funds with the ECB instead of passing on the capital in the form of lending. (Sources)
EQUITIES
European equities opened markedly lower in the wake of the Moody’s Spanish banking downgrade, and have seen some choppy trade since then, with most cash markets managing to tip into positive territory as the US comes to market with the exception of the FTSE-100. Market talk of asset-reallocation into stocks from fixed-income has helped lift sentiment throughout the morning, however this remains unconfirmed. With the periphery outperforming, some attention has been given to reports that Spanish banks are pressing the market regulator to reinstate a short-selling ban on domestic financials in light of the recent moves. This has helped keep any negative sentiment towards the sector at bay, with peripheral financials making up a significant segment of the top gainers in Europe today. As such, shares in Bankia, seen on a sharp downwards trajectory for the past few weeks have bounced back somewhat and now trade markedly higher by as much as 30% at some points of the session.
In individual stocks news, FTSE-listed Man Group are seen lower following overnight reports from a Numis analyst, highlighting that the company is unlikely to be an acquisition target unless it was to trade below liquidation value. On top of this, the Man Group have had their outlook changed to negative from stable at S&P. As such, Man Group shares now trade lower by 1.5%.
FX
A large option expiry of around EUR 2bln in EUR/USD at the 1.2700 handle has helped the pair from breaking lower in the light of the Moody’s downgrade. As such, relative EUR strength is observed across the board as the US comes to market, with EUR crosses touching on session highs in recent trade.
AUD weakness was observed going into the EU session following overnight comments from the ANZ group, saying that wholesale funding for Australian banks had frozen in the light of the European crisis. Since then, AUD is seen grinding higher across the board, with AUD/USD now trading between two touted option expiries at 0.9850 and 0.9900 respectively.
COMMODITIES
WTI crude futures came under selling pressure overnight following weaker Chinese housing data, however heading into the NYMEX pit open WTI crude futures retraced the overnight losses moving in tandem with the equity markets in Europe.
Oil & Gas News:
- Qatar expects its condensate production to exceed its crude output very soon even while it produces its maximum OPEC quota of oil.
- Iranian oil production fell by 12% in the first three months of the year and is likely to fall even more, industry experts say, as sanctions make it increasingly hard for the country to find markets for its crude.
- Total chief economist expects USD 100 oil in next few years and does not expect oil prices to drop below USD 100.
- Japan seeks 15% summer power savings in western regions.
Geopolitical News:
- Iran and the U.N. nuclear watchdog are nearing a framework deal on how to tackle concerns about its atomic activity.
- Japanese oil refiner Idemitsu Kosan has renewed its annual crude oil purchase deal with Iran but cut the volume in line with its peers to comply with US sanctions against the Islamic nation.
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The coon's opening market recap is to water the tomato and pepper plants, let the dogs out, and fix another cup o' coffee. Easy does it.
If you're fixin' it by the cup, just make sure you do you part and only use Green Mountain
The chief of the Australia and New Zealand Banking Group has said volatile conditions in global markets have caused the wholesale funding market for Australian banks to freeze, a further sign that the European turmoil is taking its toll on global markets.
Provides them with a great excuse just in case their housing Ponzi unwinds beyond management's ability to stem the panic.
The fact that Europe has absolutely nothing to do with that will, of course, somehow be entirely missed by the 23 million confused and frightened.
"... conditions in global markets have caused the wholesale funding markets for Australian Banks to freeze ..."
and there it is. flashback to Sept 2008. as it turns out, it is not different this time - go figure.
If true -- it's completely irresponsible that they are not even considering a contengency plan.
From link referenced by Tyler:
"We completely deny that we are working on any such emergency plans" the spokesperson told MNI.
"We are concentrating all our efforts on supporting Greece and keeping it in the Eurozone. That is the scenario we are working on," the spokesperson said."
At least the printers are preparing for it:
(Reuters) - De La Rue (DLAR.L) has drawn up contingency plans to print drachma banknotes should Greece exit the euro and approach the British money printer, an industry source told Reuters on Friday.The news comes as EU trade commissioner Karel De Gucht said on Friday the European Commission and the European Central Bank are working on an emergency scenario in case Greece has to leave the euro zone - the first time an EU official has confirmed the existence of contingency plans.
http://uk.reuters.com/article/2012/05/18/uk-delarue-greece-idUKBRE84H0DH...
But... New Zealand has managed to provide a $150 million loan to the IMF, for the assistance of Greece (and whoever else's economy is an irredeemable sucking hole).
In spite of the fact that the government is borrowing $100 million a week for deficit spending. (from the Chinese)
What could possibly go wrong with that...